As the first decade of the 21st century comes to an end, the pharmaceutical industry is facing a major revenue downturn. The contributing factors are the expiration of patents on a number of blockbuster drugs and the stagnant productivity of R&D. As a consequence generics are expected to seriously erode revenues and the introduction of new proprietary drugs is not adequate. The once insular pharmaceutical industry has been forced to look outside beyond its walls for drug pipeline candidates. The result has been an almost expediential growth of the past decade in the number and value of strategic alliances. This report analyses in detail the key driving forces behind the growth of strategies alliances and the changing characteristics of such deals to include:
- The pattern of escalating deal valuations
- Typical components of a strategic alliance
- Timely commentary for alliance executives
- Trends for future strategic alliance deals
- Recommendation for the future
Strategic Alliances: Synergistic Path to Value Creation reviews the structure of the past decade of strategic alliance deals in order to focus on the components, valuations and growth of such deals. Much of the growth in strategic alliances has been driven by the pharmaceutical industry’s need to add candidate products to its drug development pipelines. The industries internal R&D programs, despite escalating budget increases, have not been able to replace the blockbuster drugs coming off patent.
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- CHAPTER 1
- MAJOR DRIVERS OF STRATEGIC ALLIANCES
- 1.1. The Big Picture
- 1.2. Patent Expirations and the Revenue Cliff
- Other Challenges to Revenue
- 1.3. The Decline in R&D Productivity
- 1.4. The Role of Strategic Alliances
- CHAPTER 2
- THE PRODUCTIVITY GAP
- 2.1. What are the Fundamental Problems Behind the Productivity Gap?
- 2.2. A Paucity of Innovative Drugs
- 2.3. The Post-Genomic Era
- 2.4. The Druggable Genome
- 2.5. Advancement of the Productivity Bottleneck
- 2.6. Consequences of the Productivity Gap
- 2.7. Changes in the Regulatory Environment
- CHAPTER 3
- ALLIANCE PARTNERSHIPS: A HISTORICAL PERSPECTIVE
- 3.1. An Introduction to the Historical Data - 1992-2006
- 3.2. Strategic Alliance History by Average Deal Values 1998-2006
- 3.3. Strategic Alliances History by Percentage of Constituent Financial Terms 1998-2006
- 3.4. Alliances History by Percentage Compared to 1998-2000 Values
- 3.5. Royalty Rates in Strategic Alliances: Developmental Stage at Signing is Important
- CHAPTER 4
- EVALUATION OF SELECTED STRATEGIC ALLIANCES DURING A FIVE QUARTER PERIOD
- 4.1 Strategic Alliances H2 2007- Q3 2008
- 4.2. Contributing Factors Influencing the Formation of Strategic Alliances During H2 2007- Q3 2008
- 4.3. Average and Median Values in 2007-2008*
- A. Average Values in left series (solid bars)
- B. Median Values (striped bars, right series)
- 4.4 Deal Counts of Strategic Alliances H2 2007 -Q3 2008
- 4.5. Global and Non-Global Agreements
- 4.6. Multiple Phase Agreements
- CHAPTER 5
- BIG TICKET STRATEGIC ALLIANCES
- 5.1. Strategic Alliances with a Total Value at $100 million and Above: An Overview
- 5.2. Big Ticket Strategic Alliances: A Closer Look
- 5.3. Are Big Tickets Alliance Upfront Payments Justified?
- 5.4. Co-Development and Co-Promotional Deals Are Desirable
- 5.5. Selected Strategic Alliances by Total Deal Size
- CHAPTER 6
- FINANCIAL OPTIONS INFLUENCING THE FORMATION OF STRATEGIC ALLIANCES
- 6.1. Financing Options for Intellectual Property Holders of Early Stage Ventures
- 6.2. Private Equity De-risking Strategy: Collaborative Development Financing
- 6.3. Corporate Venture Capital
- CHAPTER 7
- AN ARRAY OF PARTNERING STRATEGIES AND OPTIONS
- 7.1. Essential Elements Of A Good Strategic Alliance Partnership
- 7.2. A Shift in Leverage: Deal Dynamics Have Changed
- 7.3. Alliance To M&A Deal
- 7.4. Nurturing An Independent R&D Culture At Big Pharma
- 7.5. Big Pharma Out-licensing In-house Programs
- 7.6. A Fully Integrated Pharmaceutical Network (FIPNET): A Model for the Industry?
- 7.7. Big Pharma Spin-off R&D Units to Create New Venture
- REFERENCES
- INDEX
- TABLES, BOXES AND FIGURES
- TABLES/BOXES
- Box 1.1. Factors Contributing to Current Trends in the Formation of Strategic Alliances
- Table 1.1. Drug Patent Expiration 2007-2009
- Table 1.2. The Impact of Generic Drugs Competition: Erosion of Big Pharma’s Revenues (USD Billions)
- Table 2.1. Glossary of Terms
- Table 2.2. Dr. Lipinski’s Survey of Drug Innovation 1994-2001
- Table 3.1. Average Deal Values of Financial Term Constituents by Stage 1998-2006 (millions USD)
- Table 3.3. Percentage of Deals by Financial Term Constituents and Stage 1998-2006
- Table 3.4. Percentage of Average Deal values Relative to 1998-2000 Values
- Box 3.1. LES Survey Benchmarks for Biopharma Royalty Rates and Deal Terms
- Table 4.1. Average Deal values of Constituents (Financial Terms) by Stage H2 2007-Q3 2008 (millions USD)
- Box 4.1. Data Classifications
- Table 4.2. Count of the Number of Deals with Financial Term Components or Total Values 2007-2008
- Table 4.3. Selected Non-Global Licensing Agreements in 2007-2008*
- Table 4.4. Selected Multiple Phase Deals
- Table 5.1. Selected Early-Stage Strategic Alliances By Total Deal Size $1 Billion and Above (million USD)
- Box 5.1. A Climate Favoring Big Alliances For Early Stage Compounds
- Table 6.1. Tapping Into Foundations
- Table 6.2. CVC Funds Investing in Biotechnology
- Table 6.3. CVC Funds Investing by Size, Focus, Stage and Stipulations
- FIGURES
- Figure 1.1. US Biotech-Pharma and Biotech -Biotech Strategic Alliances
- Figure 1.2. The Decline in R&D Productivity I
- Figure 1.3. The Decline in R&D Productivity II
- Figure 2.1. Dr. Lipinski’s Targets, Ligands and the Rule of 5
- Figure 2.2. Marketed Small Molecule Drug Targets by Biochemical Class.
- Figure 2.3. A Diagram of the Druggable Genome
- Figure 3.1. Average Deal Terms and Total Deal Values by Year 1992-2006 (USD million)
- Figure 3.2. Average Milestones and Total values by 3-year Increments
- 1998-2003 (USD million)
- Figure 3.3. A Comparison of Tiered and Fixed Royalties
- Figure 4.1. Decade of Average Deal values of Constituents by Stage 1998-2008*
- Figure 4.2. Average and Median Deal values of Financial Term Constituents by stage 1998-2008*
- Figure 5.1. Big Ticket Alliances:: Number of Deals and Total Announced Values $100 Million and Above (millions USD)
- Figure 5.2. Big Ticket Alliances: Average and Median Announced Size (millions USD)
- Figure 5.3. Big Ticket Alliances: Total Value of Upfront Payments and Equity (million USD)
- Figure 5.4. Big Ticket Alliances: Co-Development, Co-Promotion and Co/Co Deals
- Figure 6.1. Current Deal Terms By Development Stage
- Figure 6.2. The Corporate Venture Capital Paradox
- Figure 7.1. Eli Lilly’s FIPNET Model
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